At the same time, the amount of coverage and attention it is getting and for a sustained period makes me believe I am missing something.
After all there are few instances of technology fads that have sustained such serious interest for a prolonged period of time (approaching a decade now) with little to show for in terms of investment returns or societal impact.
I am talking committees formed in parliaments and central banks around the world to discuss its benefits, serious universities dedicating whole programs on the subject, elite investors pouring money into its potential, and the list goes on.
So far the most charitable explanation I could come up with for the craze is that it is an effective rebranding for marketing purposes of database technologies, similar to how "data science" rebranded statistics and business analytics.
On the other hand "data science" even if it is merely rebranding did arguably lead to significant change in tooling/workflows in how data is consumed and presented in corporates around the world, no such thing could be said of blockchain.
Where am I going wrong? I am particularly keen to hear from people who underwent the journey from skeptics to believers in the space.
Other proposed applications are mostly dumb / misguided, like immutable storage, social network posts, etc, these can be done with hashing or digital signatures alone
If you have a better way to avoid double spending than blockchain folks woukd get very excited. Traditional database can’t do that (requires a trusted party)
And I’ve still come to roughly the same conclusion as you. Either my reading comprehension is poor, or there is little actual value in the vast majority of blockchain applications. Digital cash, as defined in the Bitcoin whitepaper, still seems like the only real use case.
Other uses are fun for a developer to read and learn about, but that’s just about the only real value you can extract from them.
Well, and making quick developer buck, which is the equivalent of selling shovels to prospectors in a gold rush. The main difference being that it’s merely a jpeg of a shovel.
Even if we're talking about smuggling money out of authoritarian regimes, or buying soft drugs, or hiring hitmen online, I'm not sure it makes any actual sense compared with alternatives.
Feels like a way for people who've been convinced that government doesn't work to feel like they're re-inventing government with extra steps, mixed with a cult/mlm/ponzi scheme.
IMO the big breakthrough of crypto past bitcoin is that we figured out that cryptocurrencies can use money incentives to run other applications than just payments. People are doing all sorts if things, many scams but also many useful applications.
That is most accurate description of blockchain I have read.
Unfortunately, the mechanism for that (Proof-of-work) is slow, expensive and planet destroying at scale. And while we may remove a trust provider third party, we aren't getting rid of centralization with blockchain anyway.
It might interest you to know then that the short, digestible 8 page whitepaper on Bitcoin, which originally described the blockchain, specifically used this definition. It's the most accurate because it is what a blockchain was designed for. I recommend giving it a read and ignoring any project which doesn't follow its core tenants.
https://bitcoin.org/bitcoin.pdf
This has been repeated often.
I usually think everytime I read this: what if the price of electric power included the price of destroying the planet?
For me this looks like a market failure that proof of work is allowed to destroy the planet.
You consume a lot of electric power? Then you pay the full price of it!
Obviously if the peers work together with the goal to reach consensus based on fix rules it becames way more efficient. Only a few year after bitcoin this was already invented theoretically and shortly after build an went online 2012/13. It essentially depreciated PoW (and Bitcoin) long before all the BTC clones existed and even before ETH. People just tend to stick to "the first of something" and fight whatever comes after.
tl;dr The secret sauce of blockchain is not PoW, its a public state of a ledger that can be verified to be correct by anyone without trusting anyone simply by applying the rules of the system yourself.
It's not expensive. Transaction fees are just fine and getting cheaper over time.
It doesn't destroy the planet. You're thinking of the fossil-fuel industry.
This problem is inherent in all Nakamoto Consensus style implementations (basically Leader Election algorithms), not just Bitcoin's PoW.
Simpler: anyone can fork the blockchain and over-write the ledger with the new transactions. So in reality the double spend solved by the social consensus on the right fork, not by technological solutions.
EDIT: Leaving aside the question of transaction finality and probabilistic nature of the Nakamoto Consensus, which making it even worse.
--
[1] https://en.wikipedia.org/wiki/Hash_chain
Yes, and avoiding the trusted party makes it more inefficient by a factor of around 100,000,000 (-ish), if you consider that BTC uses around 23 GW and can do no more (5 transactions a second) than a single trusted PC could do.
What are use cases were you actually need this and the high cost is worth it?
Some people feel strongly this security is worth it. Some feel strongly that it isn’t (but one suspects their objection is really to the lack of central control)
As for layer 2's this could partly be the solution to some high costs. But risks sacrificing decentralization.
I would add that in nearly all cases it is totally reasonable to have a trusted party, and therefore that the value of the blockchain collapses down to a very, very small number of use cases (the ones that we all know about - fraud, extortion, money laundering, tax avoidance).
The trust 'problem' is overrated, because nothing in this world works without trust.
> the trusted party isn't eliminated by blockchain, because someone has to code the implementation of the software
I don't think is relevant in practice, and I think the blockchain does solve this problem regarding double-spending. Yes, there's a centralized set of developers, but that does not seem to be a problem in practice, 13 years in
> The trust 'problem' is overrated, because nothing in this world works without trust.
Bingo, this is the real problem. The world has very few problems where a trusted authority / arbitrator isn't a massive benefit.
Since BTC/ETH/etc is only “valuable” because of wild speculation and greater fools, the “value” part kind of collapses, leaving the “currency” aspect moot. Which brings us back to “no value”.
Central authorities might do wild stuff like block Folks They Don’t Like (certain truck drivers, etc). Some people think that’s really good, others feel the opposite
(edited for clarity)
For example, the trusted entity might reverse a donation to Canadian truckers due to political reasons (allowing the donator to "double spend" by doing something else with the money later).
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The notion of “single” entities in society is, I think, flawed. A bank is not a single entity, for instance—they are not just a single actor—they are governed by a board and bylaws and shareholders and government regulations and judges, etc. If something goes wrong, which is expected and built into the system process,there is due process. And the strength of that due process is governed by the self interest of all the parties at play.
The main purpose of blockchain is to attempt to replace the messiness of human governance with the certainty of algorithmic governance. But it is an illusion in many ways and dangerous, in a sense, to put so much trust in an algorithm. I think that much of the philosophy around blockchain comes from the lack of faith in human governance—which is to say, a certain kind of misanthropy.
A web of entities of varying integrity, not so much.
I also know a good use case for blockchain: scamming. Practically all the current use cases revolve around that. The trusted party wasn't so bad after all, eh?
But to be honest, I feel like there's one good use case for cryptocurrencies which isn't a use case for me, but is for people who live in oppressed regimes: the ability to not use the currency of the autocratic government. This would be true for some South American countries, but also nowadays for a country like Russia. Other than that, I see no use case.
There are lots of industries where tamper proof records are valuable and record keeping is distributed.
Why isn't putting that data (or a hash of it) in a publicly available git repository just as good? You can even publish the newest branch hash in the newspaper everyday if you want.
You can't just create a proof-of-work blockchain to hold your records. That blockchain also have to be a functioning economy with a large enough market cap to pay out mining rewards that are large enough to make a 51% attack economically nonviable. If you fail to do so, or the economy falls apart, all tamper-resistance just disappears.
It actually ends up being cheaper just to trust a group of authorities, and pay auditors to make sure they are being trustworthy.
That is the key. Crypto currency is a thing. I don't think that has a future either but whatever. All other uses are just hype and those applications make no sense except to fool investors.
Which sounded beautiful, until I realized that there must needs still be some other market around the blockchain, in order to interface with reality and older currency systems. There, all privacy bets are off.
Thus, even if one wanted to conduct and election, and put all votes on a block chain, maintaining a secret ballot seems impossible, as far as I can tell.
Sometimes, a primitive solution like a paper ballot has crucial superior aspects.
Don't know these names? Together they hold over $100B in assets. It's crazy how out of touch with what's going on in DeFi HN is. That you can say there is nothing useful meanwhile there are tens of thousands of people using billions of dollars with these apps all of which depend on a Blockchain to function.
I agree with this. I would add that by removing the need for a trusted party, it can increase speed.
For example, stock trades are currently T+2 to handle settlement through the various institutions. There is a push to start using blockchain to speed it up to T+1 or faster.
NIST's Blockchain Technology Overview is really good explainer:
* https://csrc.nist.gov/publications/detail/nistir/8202/final
See especially Figure 6 ("p. 42", 53 of the PDF), which is a flow chart to help you decide on whether blockchain matches one's use case. Extracted:
* https://imgur.com/a/RlUj9Ed
Do you need <something you almost certainly don't need>? No -> consider DATABASE
for piracy, it was private tracker seed ratio. for web3, it's either on a blockchain or ipfs/arweave.
it's not a good fit for most applications, but when you want a file to probabilistically last forever, now there are options.
Proof-of-work - the USP of blockchain makes it slow and expensive and planet destroying at scale. But it's not a bug, it's a feature. You take it out and the blockchain is neither public not permission-less. A private, trusted, permissioned blockchain is pointless.
The whole blockchain, web3, crypto, NFT, DeFi, DAO ecosystem is a massive ponzi scheme. The proponents keep cooking up new buzzwords to keep the pot boiling and to attract new starry eyed idiots who will bring in real money into the system to keep the ponzi going.
Blockchain is a hammer in search of nail. A solution for problems that do not exist.
You can't have a (PoW) public blockchain that is Secure, Efficient (=not planet destroyingly wasteful), and Valuable. Pick any two.
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Not at all - it's a verifiable audit log. Git is an example of exactly this.
Maybe that's not that obvious from some first-world countries perspective, but money with enforced property right over any governments decisions is pretty much important.
Some people gambling in NFTs, sitting in developed countries. Others try to save their life's work from thiefs, wars, inflation and other things. Your view depends on what you crowd in.
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Also, taking your money elsewhere is imo a valid way to hinder the Putin regime.
Because I can't. It's wealth oppur. destrying system only to create wealth for certain age group with assets and their friends.
Millennials and newer gener. are out of most of the "real "financial oppr. by design. So they create their system. It's that simple.
https://www.lynalden.com/bitcoin-energy/
I'd say that BTC + ETC use up about 1% of world electricity. That is significant, given that the main value is to make a few miners rich ($50m a day).
> and won’t increase too much.
The energy usage (more precisely: the amount of money spent on energy and electro waste) is roughly proportional to BTC price, I posit (until the next halving), and so would go up dramatically if BTC went up dramatically (like 100x, as Peter Thiel suggested at Bitcoin 2022 in Miami recently).
Some examples IMHO are logs of participation (e.g. voting), agreements (e.g. contracts), exchange (e.g. payments), and auditing (e.g. compliance).
A blockchain can be public or protected i.e. private just to the participants. A blockchain can store plain text information or access-controlled information i.e. encrypted information or links to sign in systems.
All of these capabilities provide massive trust advantages over a traditional database as managed by a central administrative entity, which requires the participants must trust the central administrative entity to be truthful, unbiased, secure, and with sufficient high availability and disaster recoverability.
This sounds very close to a git repository, which Linus wrote using only SHA libraries.
Say we're assuming the git repo includes gpg signing and users can make commits attesting that they've sent some amount of their balance to another user.
John makes a commit saying he sends his entire balance to Alice.
John pushes that to a central repository, and Alice gives him her house in return.
John then pushes another commit with an older date saying he actually sent his entire balance to Bob.
Which commit does the network trust?
Aside from that, there are also smart contracts which (to my knowledge) are the first example of code that can be run in an open distributed manner with verifiable source.
It's pretty interesting stuff.
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> Some examples are logs of participation
Yes and: Medical records.
While working in healthcare IT, mid-2000s, our records would be used to show who knew what when. There was a general uneasiness that our source of truth was just database entries and log files. I had somehow heard about using rolling hashes in log files. As you well know, then if any entries had errors (bad code, tampering, whatever), we'd be more likely to spot them. I managed to implement a prototype, before our startup was acquihired and our products shutdown (sniff). Sadly, none of the new PHBs understood or were interested in all the cool tech we had created.
Then some time later people started talking about slapping RFID and QR onto everything. Because hospitals are like a fight pit, with belligerents from different orgs and corps, coming and going, we thought to use a shared (tamper evident) audit log. aka blockchain. Sadly, that too didn't come to pass on our watch.
Beyond shared audit logs -- stuff like PoW/PoS, currency, whatever -- doesn't made any sense to me. I eventually decided it's all grift, though I'd be happy to proven wrong.
many of these things require privacy (and/or secrecy), which blockchain cannot guarantee (nor offer)
a private blockchain is simply a slower centralized database
> which requires the participants must trust the central administrative entity to be truthful, unbiased, secure, and with sufficient high availability and disaster recoverability.
that is exactly how voting, agreements (e.g. contracts), exchange (e.g. payments), and auditing (e.g. compliance) work.
You trust the regulator/intermediator/notary/government/bank etc.
Note that not everything needs to be public. One can (and in many cases should) save the transaction details in a private chain (or database for that matter) and publish only its signature publicly, so that any change can always be detected. But of course there still need to be the usual society safeguards present, otherwise no technical mean will solve anything.
For the most part, it doesn't work.
An extremely small number of crypto trades are done without trusting some 3rd party.
For example, what is your crypto worth? Most people trust unregulated crypto exchanges to tell them. Exchanges that can and do engage in minting their own crypto and using it (and other means) to manipulate the "free" market.
Blockchain solves a problem that most people don't have --- it eliminates trust in banks and government --- and replaces it with trust in unregulated exchanges that are free to scam and collude at will.
Blockchain applications don't necessarily need to use existing cryptocurrencies. However in that case you need to find some other incentive to get people to mine your blockchain, which is hard. And consequently having a small mining pool makes you vulnerable to a 51% attack defeating the entire purpose of a "tamper-proof" log. Thus it's easier to just use Ethereum, which in turn drives up demand for that cryptocurrency.
It just seems collective delusion in pushing the technology by people who have little stake in it if at all, and sensible people have just given up trying to point out that it is vapourware, but the attention seems to be increasing year on year if anything...
People who hold cryptocurrency benefit from increased demand and hype around it. It drives up the value of their assets even if indirectly.
Not everyone may even be aware that they have this conflict of interest. They may genuinely buy into the hype, which is why they hold cryptocurrency in the first place. However as always we should be skeptical of technology advice from people who stand to make money from you choosing one technology over the other.
It’s always funny to see early adopters’ criticisms of inflation politics and power to the 99% rhetoric when all they want to do is flip the curve around and apply the same “upward distribution” to their monetary system, but in reverse (timewise) and worse (distribution wise).
It's been more than 10 years. Where's the cool stuff that those supposed technology breakthroughs enabled?
I think we all know what the proponents would point to. Are we really impressed by any of that?
Initially the internet was bulletin boards and poor quality online versions of print shopping catalogues, news articles with no images or low-res images, etc.
It took a while for internet-enabled capabilities to noticeably surpass things you could do by dialing an 800-number or mailing a cheque to a PO Box.
In terms of adaptation, once someone had access to a computer, with few exception people found some utility in their daily lives for it.
IMHO, folks who have access to crypto are not finding any immediate use for it in their daily lives. And further, it doesn't seem to scale very well. Sure, enough coins exist, but they can't be transacted without massive fees. Ergo, doesn't scale currently.
If some breakthrough solves the scaling problem while retaining it's decentralized nature, it may gain some utility.
Defillama had a list of the biggest apps, just work your way through the list. Or listen to the bankless podcast.
The sense of belonging being one of the hackers trying to fix the current issues with current systems. The issue is that many of them are indeed broken, but decentralization is not an answer to 99% of them.
What I love about the industry is that it really attracts a lot of cool and smart people similar to what 2000s internet used to be. I just hope you guys won't get REKT.
You could build an online currency with a database much more easily than blockchain but people won't use it because it relies on a central authority to maintain the database and not enough people will trust that central authority not to misuse their power. It was tried a bunch of times in the past and never worked.
Fundamentally though it isn't about the technology it's about the transition. It's about money transitioning to a purely digital form which people will use.
In the past entire industries have been revolutionised multiple times by such transitions. Music moved to digital via mp3. TV, Movies via efficient video codecs and streaming. In both cases those shifts caused massive and unpredictable changes to how we consume and buy music/tv.
Now that money is making the same transition, people are jumping on it hoping to profit from it and money is much much more important a technology than music or tv/movies, it's the fundamental technology of society.
If you use something like Monero it's also much less traceable than digital fiat.
Most will be failures in the same way that most new businesses/startups are ultimately failures. BUT the difference is there is actual experimentation with money now in a way that there never was before.
Sure, we already have tons of currency transactions going on digitally and on-line, but Bitcoin offers something that the centralized entities cannot, and these are (in no particular order):
Unconfiscatable: Because nobody can take your bitcoins away from you unless you give away your keys.
Regulation resistant: Because nobody can stop you from trading or transacting with your bitcoins at any point if you own the keys. Bitcoin does not care about which borders it goes over, or the regulation therein. (But if you break the laws of your country by making illegal transactions, then you're of course taking a huge risk.)
Crime resistance: Granted, you can be coerced into giving up your keys, but then you have the option to flag your own account for all other parties. Since all transactions are public on the ledger, it will prevent criminal parties from using your funds with full anonymity, thus making them a lot easier to catch.
Relative privacy (but not 100% anonymity): Because nobody can really know who owns an address or a transaction unless they have access to special intel that they usually will only be privy to if they own a ton of third party hardware, software and skill (i.e. if they're operating for a totalitarian surveillance state). Or if you willingly give it up your anonymity to some central authority that promises to safekeep that information, which most buyers do, btw, which decreases regulation resistance while it increases crime resistance.
Corruption resistance: Honestly, if you want to commit crimes or corruption, then cash is a way better vessel for value, since all transactions with cash are near 100% anonymous (barring widespread bank note ID code control which is also limited), and there are several superior ways in which cash may be whitewashed if you have the infrastructure for it. Meanwhile it's surprisingly hard to whitewash Bitcoin given that all transactions are public.
I might even have missed a few value propositions, but those are the most important.
> and even today, actually using BTC for non-investment purposes is a tiny minority
This is increasingly untrue. Take the countries now adopting Bitcoin as legal tender (with the Lightning Network), for example, and the many stories of people using it to make bigger purchases.
Sorry, EUR and USD and KES (Kenyan shilling, uses a great cheap payment system on mobile phones called M-Pesa) and XRP (Ripple, a "crypto currency" with a central authority) don't work? I hadn't noticed.
Above is just about money but there is another perspective. Think about a car sale and how would you automate it. To date most car sales require some paperwork to register the right transfer. This happens behind the scenes and you may not know but it happens and occupies some people. You simply cannot automate a car same with just a database. There must be a trust component in the system and a way to maintain it. Trust maintenance typically means audits, licensees, etc and they do not come for free.
Respectfully, this is a deeply ignorant and factually incorrect sentence.
This indicates to me that: you have never travelled outside a limited set of highly-developed countries; never met anyone from a developing country; never had to send anyone more than $10,000; never had to send or receive money from another country; never met anyone who sends or receives remittances; never done any cross-border business transaction requiring FX conversions.
In some of the above instances, it is technically possible to send money from A to B, but only at very high cost, slowly, and with serious privacy and, at times, physical safety tradeoffs.
I would encourage you to look into how those usecases currently function, in a nuts-and-bolts way. It is ugly. A decent book on this subject is "Check Your Financial Privilege", by Alex Gladstein.
"You could build an online currency with a database much more easily than blockchain but people won't use it because it relies on a central authority to maintain the database and not enough people will trust that central authority not to misuse their power." Credit cards run 100% of online transactions and do a fantastic, quick, and cheap job of it. Crypto isn't creating something wholly new, it is attempting to compete with a network that charges 1-2% fees, works in seconds, and handles 1 BILLION transactions a day. With BTC you can't predict the fees or the transaction time and the network handles ~40k transactions a day, at extreme cost. Crypto currencies get more inefficient as more nodes come online (hence the proliferation of "side-chains" for games that need to actually, you know, make a non trivial number of transactions per second) and so they fundamentally break at scale. And don't try to spout some line about Proof of Stake, Ethereum will continue to push back the migration until the heat death of the universe.
Now you will probably respond that credit cards use existing currencies and the fundamental shift here is that this is an "online currency" vs "online payments". To the average person this is a distinction without a difference. Really this is fundamentally political, an (openly stated!) war on the Dollar, the Euro, the Yen, etc and the associated governments by anarcho capitalist Libertarians who want to trade bureaucratic government services with profit-driven corporate services
Speculation may have become the reason for a large portion of blockchain transaction volume but don’t for a second doubt that the actual velocity of money on dark net markets has been steadily growing.
Put in an extreme way, if all the speculators left tomorrow, Bitcoin isn’t going to 0 because people are actually using it.
2. Crypto is mostly open source software. Most open source software gets better quickly. Writing off crypto completely because of its current state is a bit short sighted.
3. Could you say more about proof of stake? Vitalik[1] supports it and so do most eth devs. Seems to be a matter of time and implementation.
1 - https://vitalik.ca/general/2020/11/06/pos2020.html
Afghanistan: https://theintercept.com/2022/01/19/crypto-afghanistan-sanct...
Argentina: https://www.bbc.com/news/business-60912789
Russia: https://www.reuters.com/world/europe/navalny-ally-urges-dono...
Lebanon: https://www.reuters.com/article/lebanon-crypto-currency-yout...
Nigeria: https://www.coindesk.com/tech/2020/10/16/nigerian-banks-shut...
Ukraine: https://www.cnbc.com/2022/03/23/ukrainian-flees-to-poland-wi...
Myanmar: https://www.bloomberg.com/news/articles/2021-12-13/myanmar-s...